The benefit cap Contents

2Does the benefit cap incentivise work?

Benefit cap as a work incentive

15.Alongside the benefit cap’s aims to restore fairness to the benefit system and secure financial savings, the DWP says the cap aims to:

Incentivise work - to reduce poverty and increase economic prosperity.17

The Department explained that exemptions for claimants who receive Working Tax Credits, or whose earnings rise above the UC earnings threshold of £542 a month, exist to provide claimants with a work incentive. Claimants can escape the cap by moving into work or increasing their hours to a minimum of around 16 hours a week.18

Disproportionate impact on certain groups

16.Evidence to our inquiry raised concerns that the cap disproportionately impacts households that the Department itself has recognised—through its own assessment—face barriers to moving into employment and are therefore not required to look for work.19 DWP’s latest statistics show that in November 2018, just 18% of claimants who had their benefit capped were claiming Job Seeker’s Allowance, the benefit for which claimants are expected to be actively seeking work.20

17.The majority of capped households are claiming benefits which do not require them to look for work (known as “job search conditionality”). These are mostly households claiming Income Support (IS) or Employment Support Allowance (ESA). In November 2018, 51% of capped claimants were claiming IS, a benefit mainly for single parents with young children; and 13% were claiming ESA, which means they had been assessed as having limited capability to work due to illness or disability.21 Figure 4 sets out total benefit take-up for households who have had their Housing Benefit capped.22

Figure 4: Capped households by their benefit take-up (November 2018)

Source: DWP Benefit Cap statistics to November 2018

Conditionality: Benefit system vs benefit cap

18.Conditionality and sanctions can apply to claimants of JSA, IS, ESA and UC. The level and intensity of conditionality depends on a claimant’s circumstances; for example, whether they have a disability or health condition, young children or caring responsibilities. Both ESA and IS are paid on the basis that the claimant is, at that time, not expected to carry out the full range of work-related activity that is expected of a claimant on Jobseeker’s Allowance. Claimants in these groups may be required to take some steps to move closer to work, such as attending work-focused interviews or undertaking ‘work related activities’, but they would not be expected to find a job. But the very same claimants can find themselves subject to the cap, from which the main escape route is moving into work.

19.Child Poverty Action Group said that there were “gaping inconsistencies” between the conditionality applied in the benefit system, and the “blunt” conditionality of the benefit cap, which penalises vulnerable claimants.23 Sam Lister, Policy and Practice Officer for the Chartered Institute for Housing (CIH) argued, “What [the cap] is doing, in effect, is sanctioning people who do not have job search conditionality when they would not otherwise be sanctioned”.24

Barriers to moving into work

20.Evidence to our inquiry stressed that the main barriers which prevent these groups of people moving into work are childcare and health problems.25 These issues were also reflected in the Department’s survey of all claimants affected by the original £26,000 cap. It found that almost two thirds (65%) of claimants reported facing major barriers to work. The main reasons reported by participants were the availability and/or cost of childcare (43%) and poor health (15%).26

Childcare

21.The Chartered Institute of Housing told us that the majority of capped households claiming Income Support are likely to be single parents with children under the age of five.27 Several witnesses explained that single parents with young children find it difficult to find jobs which fit in with their childcare or childcare that works with their job, due to a “dire shortage” of part-time jobs and available or affordable childcare.28 Laura Dewar of Gingerbread cited research which showed that fewer than 10% of jobs across the country on DWP’s own website were advertised as part-time, with many including work at evenings or weekends.29

22.The Department argued that it offers help with childcare costs to help parents back to work. In written evidence, it explained:

The government currently provides 15 hours of free childcare during term time for all three and four-year olds and for the most disadvantaged two-year olds, which includes most capped lone parent households; a further 15 hours is available when households move into work for children aged 3–4 years old;

It added that where claimants face additional costs above this, they can claim back 85% of childcare costs if they are on UC or 70% if they claim Tax Credits.30

23.However, we heard from witnesses that the Department’s offer is not sufficient. While single mothers are subject to the benefit cap from the day their children are born, the Government only provides free childcare when a child turns two years old. Furthermore, meeting the remaining costs and making upfront payments can be a challenge for single parents.31 Sally, a single parent with four children, told us that the upfront costs of childcare were the main barrier to her being able to move into work. She explained:

My biggest thing now is childcare, I can’t afford the money upfront to go back to work. Schools are only open 39 weeks of the year and you’re looking at £20-£40 a day for each child to be in a holiday club and you’ve got to pay that in advance. As much as Tax Credits pay it back … .I worked it out that I’d have to pay about £800 upfront for them, to go back to work.

Sally told us that her benefits had been capped for a year now. Had she not been subject to the cap, she would have been able to save the money she now needs to pay the upfront costs to go back to work.32

24.The Minister suggested that households who struggle in these ways can use the Flexible Support Fund (FSF) to “bridge” the gap.33 However, this Committee’s report, Universal Credit: Childcare Costs, found that the Flexible Support Fund—which offers non-repayable, discretionary grants to help claimants overcome barriers to work—has been underspent in every year since 2012–13 (see Table 2, below). While the underspend decreased significantly in 2016–17 (the latest data available), the proportion of the FSF spent on childcare has remained very small—just 2.4% (£1.2 million) of the fund was spent on childcare in 2016–17.34

Table 2: Flexible Support Fund spending, millions, 2012–13 to 2016–17

Category

2012–13

2013–14

2014–15

2015–16

2016–17

Total Budget

£99.9m

£127.6m

£178.8m

£76.8m

£51.7m

-Transport

£13.4m

£19.2m

£20.2m

£15.4m

£13.5m

- Childcare

£1.6m

£1.8m

£1.5m

£1.6m

£1.2m

- Training

£15.5m

£18.6m

£10.6m

£15.2m

£8.4m

- Other

£84.5m

£70.6m

£59.2m

£26.1m

£27.8m

Total

£115.0m

£110.1m

£91.5m

£58.4m

£51.0m

% spent on childcare

1.4%

1.6%

1.70%

2.70%

2.4%

Underspend

-£15.2m

£17.5m

£87.3m

£18.4m

£0.7m

Underspend (%)

-15.20%

13.70%

48.80%

24.00%

1.40%

Source: Letter to the Chair from Justin Tomlinson MP, Minister for Families, Child Support and Housing, 27 November 2018

Poor health

25.Claimants on ESA have been assessed by the Department as having limited capability for work due to injury, sickness or disability. Zacchaeus 2000 Trust (Z2K) told us that, for this reason, many ESA claimants it had helped were “incapable of escaping the cap by immediately moving into work.”35 Giovanni Tonutti explained that Policy and Practice’s analysis of the employment impact of the cap found that, of the groups that did not move into work, there was a disproportionate representation of single people on ESA. He said this suggests that being on ESA presents an “even greater barrier than childcare” to moving into work.36 Sam Lister also told us that many people in the ESA group have mental health problems, and that the increased stress of the cap can push them further away from work.37 Many disabled people also face discrimination when looking for work. In 2017 the Shaw Trust found that over half (56%) of the employers it surveyed said they were reluctant to employ someone with a mental health condition, due to fear of them being stigmatized by their co-workers,38 and a study by Scope found that nearly half of disabled people (48%) have worried about sharing information about their impairment or condition with an employer.39

26.One of the ways households can escape the cap is by making a new claim for an ‘exempting benefit’, which includes disability benefits such as ESA (Support Group), Personal Independence Payment (PIP) or Disability Living Allowance (DLA), Carer’s Allowance and Guardians Allowance. Organisations including Z2K and several local authorities told us they have taken the approach of helping some claimants to apply for disability benefits such as PIP, to which they are entitled, so that they are no longer affected by the cap. DWP’s statistics show that, since the cap was introduced up until November 2018, around 26,500 (13% of households capped via their Housing Benefit) previously capped households were now receiving an exempting benefit.40 It is not clear which benefits these households were claiming, as the Department told us that it does not hold data on the specific benefits that households have claimed to become exempt. However, Z2K suggested that the majority of the exemptions will be for PIP. It stressed that, while these households are no longer affected by the cap, the physical and mental health of families already prone to poor well-being will have been affected by the cap for months or even years and that households “may well have accrued rent arrears and other debts while their benefit was being capped”.41 The Department suggested that claims for exemptions may occur “as a result of a number of factors or changes in circumstances or household composition”.42

Department’s rationale for capping households not subject to conditionality

27.The Department provides exemptions for households on disability-related benefits on the basis that it understands that “disabled claimants may find it harder to move into work and also incur additional living expenses”.43 This suggests that the Department recognises that the cap places those who face barriers to moving into work at a disadvantage. However, its argument for capping households it has assessed as not being required to look for work seems to be that these households “could” move into work. In its written evidence, it said:

Just because some are not required to work under work conditionality rules does not mean that they are not encouraged to work, which is why the Government has continually provided support to help move people into work.44

28.On the one hand the Minister reiterated that it was “reasonable” for those not subject to conditionality in the benefit system such as ESA claimants to be subject to the cap because “there is an expectation they could seek a level of work”. However, he conceded that the Department does not expect all claimants affected by the cap to find work.45

Other ways to escape the cap

29.For claimants who cannot escape the cap by moving into work, the Minister suggested that there are “other things which can be changed”, such as housing costs, which he argued “maintains the principle of fairness within the benefit system”.46 In response to a question on what had happened to households who were not able to escape the cap by moving into work, he said:

some will have made other changes, including in their housing costs, whether that is either moving or renegotiating what their rental housing costs are, or they could, for example, take in a lodger.47

Nevertheless, the majority of evidence to our inquiry was clear that the options available to capped claimants unable to move into employment are extremely limited.48

Moving house

30.Several social housing providers pointed out that many of their tenants do not have the option of moving to cheaper accommodation, as social housing rent is already generally less expensive than the equivalent in the private rented sector and local authority accommodation is scarce. For example, Plymouth Community Homes told us:

55% of tenants affected by the cap are now in rent arrears. As we have some of the lowest social rents in the country it is not a realistic option for a tenant to move to a cheaper property.49

Shelter explained that there are currently 1.15 million households on waiting lists for social housing, but only 290,000 social homes became available last year. Of those people on waiting lists, almost two-thirds (65%) have been waiting for over a year, and 27% for more than five years.50

31.In addition, Jenny Pennington, Senior Research Officer for Shelter, explained that Shelter’s analysis of the rental market showed that the lower cap means it is now impossible for lone-parent families with three or more children (60% of those affected by the cap51) to avoid the cap by moving to more affordable accommodation in a different area of the country, as shown in the figure below. This is “because the cap is now so low that it is not possible for households to even cover the rent in the cheapest areas of England from the cap amount.”52

Figure 5: Areas in England where one-parent families with three children would still be affected by the benefit cap

Source: Shelter (BEC0024)

32.Even the Department’s own evaluation of the original £26,000 cap “did not find significant evidence that claimants had moved house in response to the cap”. It found that the few claimants that did move had moved locally and there had been no “large scale” movement out of London.53

Negotiating a cheaper rent

33.We also heard that negotiating a cheaper rent is not a realistic way for households to escape the cap. The Department’s survey of claimants affected by the original cap showed that just 1% of households who had moved off the cap had been able to negotiate a lower rent with their landlord.54 Several organisations, including the Chartered Institute of Housing, pointed out that, given that the cap is now lower, this is even more unlikely. Sam Lister explained that around 58% of those affected by the cap are already in social housing, which he described as “the cheapest form of housing they could be in”.55 He told us he was not aware of “any social landlord ever having accepted a negotiated down rent at all.”

Taking in a lodger

34.The Committee was particularly concerned to hear the Minister’s suggestion that claimants could mitigate the impact of the cap by taking in a lodger. In a blog post in response to the Minister’s comments, Shelter noted that as most capped households are single parents with children under 5, it would be extremely rare for them to have room for a lodger as:

It also pointed out that it is not a “safe and sensible” option for families with young children to rent a room to a stranger.56

35.We can understand the principle of imposing the benefit cap on claimants who are able to work but choosing not to do so. But the vast majority (82%) of households affected by the cap have been assessed, by the Department itself, as not being required to look for work—often because they have an illness or disability or are caring for very young children. Few of these claimants will be comforted by the Minister’s flippant suggestions that they simply move house, renegotiate their rent or even take a lodger. In reality, they are left with no way to escape the cap.

36.The Government made the case for the cap to Parliament on the grounds that it was meant for those who should be able to go to work. But it is now applying the cap to people who have been told by its own Jobcentres that they do not have to look for work, and who face major barriers to doing so. A policy aimed at people who could work but were choosing not to is now being applied to single mothers with newborn babies and people with serious health conditions. This cannot be what was intended and does not reflect the Government’s stated intentions.

37.We recommend that the Department return to the original aims of its policy and apply the cap only to claimants who it expects to be actively looking for work. Specifically, in addition to existing exemptions, the cap should only apply to claimants who are either:

Have capped claimants moved into work?

38.To measure the number of capped claimants who have moved into work, the Department looks at whether previously capped claimants have become exempt by moving into work or increasing their hours. In total, between the cap’s introduction and November 2018, 26% (57,400 out of 220,000) of households affected by the cap were no longer capped because they were working enough hours (around 16 a week) to become exempt. This includes:

Do people move into work because of the cap?

39.The Department accepts that the 26% of households who have moved into work may not have done so because of the cap. In written evidence it said that “people move into work for a variety of reasons and these official statistics on movement into work do not specifically identify a causal connection”.58

40.Giovanni Tonutti, Senior Policy and Operations Analyst for Policy in Practice, stressed the importance of isolating the effect of the cap from other factors, stating that some of those who have moved into work might have moved into work anyway. He explained:

the only way you can establish whether the cap has had any effect is to compare the employment outcome of those affected by the cap with very similar households with very similar characteristics that were not affected by the cap and compare the movement in and out of work across the two groups.59

41.The Department’s 2014 evaluation of the original cap sought to make that comparison. In written evidence, the Department said that it had found that capped households were “4.7 percentage points more likely to flow into employment after a year compared to similar uncapped households”.60 Carl Emmerson, Deputy Director at the Institute for Fiscal Studies, which peer-reviewed the evaluation, confirmed this. He explained:

Broadly speaking, what we found is that if you put the cap on 100 people after a year you would find about 10 of them would move into work and would have done anyway, even without the cap. Because of the cap that number would go up to about 15; so, you are talking about a 5-percentage point increase in the proportion in work as a direct result of the cap.61

42.Giovanni Tonutti argued that, while there is evidence the benefit cap has a positive impact on employment outcomes, in the context of the overall numbers affected by the cap this impact is “very small”. He cited Policy in Practice’s own evaluation which showed, similarly to the Department’s own research, that for every 100 households affected by the cap around 4 will have moved into work because of the cap.62

The Department’s representation of the cap’s effectiveness

43.The Department maintains that the cap has been successful as a work incentive. In its written evidence, it stated:

The Government considers that the benefit cap has been successful in helping people into work. Based on an evaluation of the original cap published in December 2014 capped households were 41% more likely to move into employment than similar uncapped households.63

However, evidence to our inquiry raised concerns that the Department may be “over-claiming” the work-incentive effect of the cap.64

44.The Department itself acknowledges that the total number of capped claimants who move into work do not necessarily do so because of the cap.65 Nevertheless, it persists in using this number to support its assertion that the cap is effective at moving people into work.66 The UK Statistics Authority (UKSA) has twice written to the Department about these claims. In May 2013, the then Secretary of State, Rt. Hon Iain Duncan Smith, said, “Already we’ve seen 8,000 people who would have been affected by the cap move into jobs. This clearly demonstrates that the cap is having the desired impact”.67 The UKSA concluded that this statement was “unsupported by official statistics”.68 Again in 2014, the UKSA investigated the Department’s claim in a press release that “More than 12,000 households have made the choice to move into work or stop claiming Housing Benefit because of the cap”. It said, “in this case, the available numeric evidence does not demonstrate a particularly strong causal link between the benefit cap and the decisions made by individuals moving into work.”69

45.The Department also acknowledges that its own evaluation showed that capped households were only 4.7 percentage points more likely to move into work compared to similar uncapped households. However, the Department has repeatedly said, including in oral evidence to the Committee, that the same evaluation found that capped households are 41% more likely to move into employment than similar uncapped households.70 Both figures are technically correct: the evaluation found that that 16.2% of households moved into work, of whom 11.5% would have found work anyway. The figure of 41% refers to the relative increase in people moving into employment, while the 4.7% figure refers to the absolute increase. This is illustrated in Table 1, below. But using the relative increase in a situation where the figures are already low risks giving the impression that the increase is much larger than it really is. Carl Emmerson of the IFS suggested that reporting the impact of the cap in this way is “perhaps not the most helpful way to describe it”.71

Table 1: Relative and absolute increases

% who move into work (total)

% who would have found work without cap

Absolute increase

Relative increase

16.2%

11.5%

4.7% (16.2%-11.5%)

41% (4.7%/11.5%)

46.Justin Tomlinson MP, Minister for Family Support, Housing and Child Maintenance (‘the Minister’), used both of the numbers described above when asked by the Committee if the cap had been effective at getting people into work. He said:

Specifically, on the point you raised about incentivising people into work, what we have seen is that those who have started on the cap, 70% have now moved off, of which [39%]72 have moved into work. What we are seeing is that of those who are capped compared to those in similar circumstances who are uncapped, there is a 41% increase of those who are able to flow into work.73

47.The Department’s own evaluation clearly shows that just 4.7% of households moved into work because of the original benefit cap (£26,000). Despite this small impact, Ministers have repeatedly sought to over-claim the cap’s effectiveness as a work incentive by quoting the total number of people who have moved off the cap and into work—even in the face of clear warnings from the UK Statistics Authority. The Government should be fully transparent about the impact of the cap on moving claimants into work. It must make it clear that while some capped households move into work because of the cap, the vast majority would have found work anyway.

48.In arguing that the cap is effective in getting people into work, the Department has relied heavily on the relative increase (41%) in capped households moving into work, compared to non-capped households. That is certainly a more impressive figure than the absolute increase of just 4.7%. But for most people, the distinction is difficult to grasp. The Government should take care that its use of statistics does not inadvertently mislead the public into thinking that the cap is doing better at getting people into work than it really is.

49.We recommend that when referring to the cap’s effectiveness as a work incentive, the Department should no longer:

a) cite the total number of people who have moved off the cap and into work as evidence of the cap’s effectiveness, since the majority would have moved into work anyway; or

b) cite the relative increase (41%) in capped households moving into work without also making clear that the absolute increase is just 4.7%.


17 Department for Work and Pensions (BEC0023)

18 Ibid.

19 Child Poverty Action Group (BEC0022), Gingerbread (BEC0012), Zacchaeus 2000 Trust(BEC0027), Brighton and Hove City Council (BEC0021), Newcastle City Council and Your Homes Newcastle (BEC0020), London Councils (BEC0018), Welfare Rights and Money Advice Service (WRAMAS) - Bristol City Council (BEC0015), Policy in Practice (BEC0029), The Local Government Association (BEC0026), Shelter (BEC0024), Shelter Scotland (BEC0013), Chartered Institute of Housing (BEC0025), Citizens Advice Scotland (BEC0007)

20 Department for Work and Pensions, “Benefit cap quarterly statistics: GB households capped to November 2018”, February 2019

21 Ibid.

22 Capped households can be in receipt of multiple benefits therefore percentages for households in receipt of each benefit do not sum to 100%.

23 Child Poverty Action Group (BEC0022)

24 Q7

25 Child Poverty Action Group (BEC0022), Gingerbread (BEC0012), Zacchaeus 2000 Trust (BEC0027), Brighton and Hove City Council (BEC0021), Newcastle City Council and Your Homes Newcastle (BEC0020),Durham City Council (BEC0019), London Councils (BEC0018), Welfare Rights and Money Advice Service (WRAMAS) - Bristol City Council (BEC0015), Policy in Practice (BEC0029), Gwent Welfare Reform Partnership (BEC003)

26 Department for Work and Pensions, “Post implementation effects of the benefit cap (wave 2 survey)”, December 2014

27 Chartered Institute of Housing (BEC0025)

28 Child Poverty Action Group (BEC0022), Gingerbread (BEC0012)

29 Q71

30 Department for Work and Pensions (BEC0023)

31 Child Poverty Action Group (BEC0022)

32 Benefit cap; claimant videos

33 Q151

34 Work and Pensions Committee, Twenty-Second Report of Session 2017–19, Universal Credit: childcare, HC 1771

35 Zacchaeus 2000 Trust (BEC0027)

36 Q3

37 Q13

40 Department for Work and Pensions, “Benefit cap quarterly statistics: GB households capped to November 2018”, February 2019

41 Zacchaeus 2000 Trust (BEC0027)

42 Department for Work and Pensions (BEC0023)

43 Ibid.

44 Department for Work and Pensions (BEC0023)

45 Q167

46 Q153

47 Q161

48 See for example Shelter (BEC0024), Chartered Institute of Housing (BEC0025), Plymouth Community Homes (BNC0046)

49 Plymouth Community Homes (BNC0046)

50 Shelter (BEC0024)

51 As of November 2018, DWP, Stat-Xplore, accessed February 2019

52 Shelter (BEC0024): Shelter considered where in England’s 152 Broad Rental Market Areas (geographical divisions used to determine the amount of Local Housing Allowance a household should receive for housing benefit purposes) rent would be low enough to avoid the cap for families of different sizes. It assumed households would look to rent at a level permitted by the Local Housing Allowance in a home that would have the minimum number of bedrooms needed not to be overcrowded. It assumed that any children are able to share rooms.

53 Department for work and Pensions(BEC0023)

54 Department for Work and Pensions, “Post implementation effects of the benefit cap (wave 2 survey)”, December 2014

55 Q50

56 Shelter, “The benefit cap is harming struggling families”, accessed on 6 March 2019

57 Department for Work and Pensions, “Benefit cap quarterly statistics: GB households capped to November 2018”, February 2019

58 Department for Work and Pensions (BEC0023)

59 Q2

60 Department for Work and Pensions (BEC0023)

61 Q2

62 Ibid.

63 Department for Work and Pensions (BEC0023)

64 Zacchaeus 2000 Trust (BEC0027), Q2

65 Department for Work and Pensions(BEC0023)

66 Ibid.

70 Department for Work and Pensions (BEC0023), Q142, Q148

71 Q2

72 Q142: The Minister said 59% in oral evidence. He corrected this to 39% in correspondence following the session.

73 Q142




Published: 12 March 2019